Wage Inequality in India

A historic moment was witnessed in India in August 2019, as the Wages Bill was passed in parliament, became an Act, and will now be referred to as the Code on Wages. This act has been established as a way to protect the payment of minimum wage workers in both organized (government, state-owned and private sector enterprises) and unorganized (unlicensed, self-employed or unregistered economic activity) sectors.

The sections covered in the Code on Wages include wages, industrial relations, social security and occupational health and safety. This act has been created as a way to protect both the workers and their employers by succinctly outlining the definitions used in all of the applicable labor acts in India in order to reduce litigation.

With the Code on Wages, minimum wage is no longer based on a certain type or sector of employment. All workers, across all industries in both organized and unorganized sectors, will now have the right to receive the nationwide minimum wage for their employment. The federally regulated, set minimum wage has been calculated to ensure that employees are at the very least able to live based on the minimum living standards of the country. The government has also stipulated that the rate of minimum living standards will be reviewed and revised (if necessary) every 5 years.

The Code of Wages has also been created to take into account different skill categories and the cost of living associated with different regions across the country. This has lead to the creation of more than 2000 “minimum wages”. While some nations, like the USA, have opted to just have one minimum starting wage, the government of India has decided to go with a different method that will help to decrease the number of issues surrounding the implementation of rates. India is increasingly following guidelines of countries like China and Russia that have also created a regional minimum wage based on the minimum living costs and standards of different regions within their respective countries.

Overall, the successful implementation of this kind of program is going to require the usage of a payment registry so that overall wages can be monitored to ensure that all employees are receiving what they deserve for the work they are doing. Additionally, the creation of disciplinary action and punitive measures for employers and organizations that don’t adhere to the Code on Wages will be important to ensure that the Code is followed.

Just before the Code on Wages was passed, statistics pulled from the country displayed that approximately 30-40% of male casual workers and 55-60% of female casual workers in both rural and urban areas received payments that were under the national minimum wage. Most workers in India work for unorganized sectors, which make these issues harder to monitor. However, with the implementation of new reporting methods and monitoring of wages, it is hoped that the Code on Wages will become an important factor in the withstanding of a minimum living wage and will also reduce the inequalities in pay observed across the country.

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